A federal court ruling recently declared that California-based Google must pay out a portion of its revenues to a small company that owns certain internet advertising patents. The Virginia judge declared that 1.36 percent of the money Google gains from its Adwords system will have to be paid to a company known as Vringo. Adwords is an online advertising system that is one of Google's most lucrative and important sources of income. The recent ruling could cause the tech giant to fork over hundreds of millions in revenue.
The patent in question was acquired by Vringo after the fallout of the once-popular search engine Lycos. Vringo bought the online advertising patents from Lycos in 2011 and proceeded to sue Google claiming that the Adwords program infringed on the patent. Vringo won that case, which cost Google $30 million. After Google changed some of its policies to avoid further payouts, Vringo brought them back to the courts. The judge recently ruled that Google's new system was not different enough. The Vringo suit also listed Target, AOL, IAC and Gannet, but Vringo will not seek settlements from these companies.
People have begun to refer to companies such as Vringo as "patent trolls." These are companies in which patent lawsuit settlements serve as a main source of revenue. While Vringo's business is technically in the realm of smartphone ringtones, the company has also spent about $10 million on legal issues. This number indicates that "patent trolling" may be the companies real business model.
Google is facing pressure from several other "patent trolls," including one famous company known as Rockstar. The ensuing legal battles can affect just about any aspect of Google's business. While patent trolling may seem like an unethical tactic, it is perfectly legal for a patent holder to file a lawsuit if their patent has been infringed upon. Only time will tell if laws are changed to thwart this practice.
Source: wired.com, "Patent Troll Strikes at the Very Heart of Google’s Empire" Klint Finley, Jan. 29, 2014